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PA pension fund manager shouldn’t have gotten $20,000 raise, treasurer says (Video)

By   /   January 24, 2013  /   No Comments

By Eric Boehm | PA Independent

HARRISBURG – One of Pennsylvania’s two pension funds is facing $14 billion in unfunded debt, but that didn’t stop one top executive from claiming an 8-percent pay raise this week.

The board for the State Employees Retirement System, or SERS, voted on Wednesday to give the raise to Anthony Clark, the fund’s chief investment officer.  Clark’s pay will climb to $270,000 annually, up from $250,000.

The pension fund has an estimated unfunded liability of more than $14 billion, though it did report stronger than expected returns for 2012.

TREASURER: Rob McCord voted against a pay raise for the chief investment officer at one of Pennsylvania’s financially troubled pension funds.

Even so, state Treasurer Rob McCord said he questioned the raise for Clark at a time when the state is facing a pension funding crisis.

McCord said Clark was advocating for an investment strategy that was “fee-heavy and lacking in transparency.”

I just thought ‘boy, this is ill-timing on a number of levels,'”McCord said Thursday. “We can do better on the fee front, and we need to get through the pension reform debate.

Pamela Hile, spokeswoman for SERS, said the fund’s preliminary’s numbers for 2012 indicate SERS spent about $176 million of advisory fees, down from $194 million in 2010 and equal to the $176 million spent  in 2011.

In a statement released Wednesday, SERS Chairman Nicholas Maiale said the pay raise for Clark was the result of leadership of the investments at SERS.

“Today’s step acknowledges the good work he has accomplished in a short time and seeks to bring his compensation closer to industry standards.” Maiale said.

McCord said Clark was told when he was hired that pay increases would be unlikely because of the funding crisis the state faces for its public pension promises to current and former employees.

Clark joined SERS as chief investment officer in 2011.

“It sends the wrong signal when the SERS board decides to be part of the problem instead of the solution, even in a small way,” McCord said.

Also on Wednesday, SERS reported a 12 percent annual return on investment during 2012.  That is well above the assumed rate of 7.5 percent that is necessary to make ends meet for the year.

In that announcement, Clark called the returns “cautiously good news,” but said it was “important to evaluate this performance in the overall context of the system, which continues to have an unfunded liability in excess of $14 billion.”

The higher-than-expected returns will do little to chip away at the debt that has piled up at SERS, most of it accumulated in the past decade as a result of poor investment returns and systemic underfunding by the state.

When combined with the larger Public School Employees’ Retirement System, or PSERS, the overall funding gap for Pennsylvania’s pension systems tops $40 billion and continues to grow.

Contact Boehm at [email protected] and follow @PAIndependent on Twitter for more.